Liquidity Management and Financial Sustainability of Deposit Taking Saccos in Mount Kenya Region

Abstract

The purpose of this research was to examine liquidity management effect on the financial sustainability of DTS in Mount Kenya Region. The study was guided by four objectives; cash management, risk management, asset liability management and management competency on the financial sustainability of SACCOs in Kenya. A census survey of all the 52 SACCOs was carried out. SACCOs within the Mount Kenya region were chosen because it was the home of 61% of the total number of SACCOs in Kenya (according to the Ministry of Industrialization and Enterprise Development, 2012. The respondents consisted of one accountant in every SACCOs as they had information about liquidity of the SACCOs. Descriptive survey design was adopted as it provided a way to interpret and comprehend liquidity management and financial sustainability of DTS. Primary and secondary data were used in the analysis. Primary data on liquidity management was gathered through structured questionnaires while secondary data was gathered from financial statements. The study achieved a response rate of 88%. In order to generate descriptive and inferential statistics, data analysis was conducted using Statistical Package for Social Sciences (SPSS). The study findings revealed that management competency has a positive and significant effect on financial sustainability of DTS. The study revealed the management had enough training to review the quality and level of information it received in order to make informed decisions and to ensure that a governance audit was conducted. Cash management, risk management and asset liability management had positive but insignificant effect on financial sustainability of DTS. In addition, member’s contributions were considered crucial to the successful implementation of effective cash management. Finally, without a guiding policy on asset-liability it would be hard for SACCOs to obtain optimal balance in asset liability and financial sustainability. SASRA role needs to be enhanced through introduction of better policy and increase the monitoring role since the sector played a critical role in achieving the country’s vision 2030 and improving the country’s economic growth.